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Today’s Homebuyers and Sellers: What's Driving Sales?
By Meredith Dunn, Research Communications Manager, NATIONAL ASSOCIATION OF REALTORS®
For many homeowners, buying a home is one of the largest financial decisions they will make in their lives. It’s not a decision to enter into lightly, and most buyers and sellers are turning to the experts, especially REALTORS®, for help. In today’s digitally-connected age, there is more choice than ever in how buyers search for a home and how sellers can market their homes, but the preference to use a real estate agent in facilitating the transaction has never been stronger: nearly 90 percent of all respondents worked with a real estate agent to buy or sell a home, according to the NATIONAL ASSOCIATION OF REALTORS® 2015 Profile of Home Buyers and Sellers. This report, which was released on November 5th, provides an in-depth look at the characteristics of recent homebuyers and sellers, as well as their experience with the transaction and what they are looking for in an agent.
Demographics are shifting upwards. Five years ago, a typical homebuyer was 39 years old and made $72,200. The recent homebuyer, on the other hand, had a median age of 44 and an income of $86,100. They were more likely to be part of a married couple household at 67 percent compared to their counterpart five years ago at 58 percent. However, recent buyers are less likely to be first-time buyers: this year the share fell for the third consecutive year to 32 percent, the lowest measurement since 1987 (at 30 percent). The lower share of first-time buyers indicates they are feeling the squeeze of high rents and high home prices in many markets, compounded by low housing inventory and continuing tight credit conditions. Those first-time buyers who did buy a home in the last year reported that their primary reason for making the purchase was simply the desire to own a home at 64 percent, compared to 53 percent in 2014.
Forty-two percent of homebuyers first looked online for properties for sale as their first step in the home-buying process, while 14 percent of buyers first contacted a real estate agent. A majority of buyers (92 percent) used the Internet at some point of the search process, and the components they found most useful were pictures of the property (87 percent) and detailed information about the property (84 percent). However, the Internet cannot replace the role of the real estate agent in the transaction. Of homebuyers who used the Internet to search for homes, 88 percent ultimately purchased their home through a real estate agent, indicating that while the Internet is a good information source, it can’t replace the expertise of an agent.
On the home-seller side, the typical seller was 54 years old this year, the same as in 2013, but up from 49 five years ago. The median income in 2014 for the typical household was $104,100, a jump from $96,700 in last year’s report. Married couples selling their home jumped back up to 77 percent again this year after a slight dip last year at 74 percent, which has been the historical norm. From 2004 to 2010, the share of married couples selling their homes stayed between 71 and 75 percent. Twelve percent of recent sellers had to stall or delay their home sale because their home was worth less than their mortgage, down from 17 percent last year. Eighty-seven percent were able to sell when they wanted to, indicating a healthy housing market for sellers, although median time on the market for recently sold homes remained at four weeks for the second year in a row, highlighting continuing low inventory in several markets.
Eighty-nine percent of sellers sold their home with the help of a real estate agent. Only 8 percent of sales were FSBOs (For Sale By Owner), which is the lowest share recorded since the report began, and suggests that sellers are by and large seeking out the help of an expert to facilitate the sales transaction rather than going it alone. Slightly more than seven out of ten sellers only contacted one real estate agent before choosing one to help them with their home sale, and half of sellers used the same agent they used to sell their home to help them make the next home purchase. That number goes up significantly for sellers staying within a ten-mile radius for their move, at 81 percent. The top three things that sellers are looking for agent assistance with are marketing the home to potential buyers at 21 percent, selling the home within a specific timeframe at 21 percent, and finding a buyer for the home at 17 percent.
Meredith Dunn is the research communications manager for the National Association of Realtors®.
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zillow.com For sale: $685,000. Enjoy in city living with style & luxury. Just steps from the charming Madison Ave shops & a short walk to the Arboretum. New interior and exterior paint! Remodeled Chefs kitchen with cherry wood cabinets, 2 updated baths with granite, jetted soaking tub & large lower level showe…
Tax Deferred Exchange Tips for the Real Estate Professional and Investor
From Kevin Hummel CES®
McFerran Law, PS.
Selling a Personal Residence
I find myself talking about this topic quite often. When dealing with residential properties, it is common for folks to bring up their home. Of course it is often the largest investment most consumers deal with in their lifetime. The IRS does not consider it as “an investment” because it is not held for productive use in a trade or business. You cannot purchase or sell a personal residence in a tax deferred exchange, of course. The good news is, in most cases, you do not have to. There is the 121 Exemption that allows you to write off $250K in capital gains per individual and $500K in gains per married couple. You simply need to live there 2 out of the last 5 years. In other words, you could have moved out 3 years ago and still be eligible for that exemption, even if you are currently renting it.
Selling Your Home
There is a publication that the IRS revises annually that spells all those details out. I would just give you the link to that paper, but it would likely cause this update to end up in your spam filter. So, just go to the IRS.gov website, and then use their search field to look for the Publication (PUB 523) called “Selling Your Home”. The one for 2013 is still up now, but it hasn’t changed in years.
“I Thought You Could Only Use That Exemption Once In a Lifetime”
There used to be an exemption available once in a lifetime, but it has been revised to be available every two years. The only exception would be if you had previously exchanged into that home via §1031. The IRS grew wise to those who were taking advantage of the opportunity to avoid paying the gains all together. Today, when you sell your residence, you will find a tax forms in the closing documents that ask those specific questions. If you exchanged into the property, you have to own it a full 5 years to qualify for the full exemption. That five year ownership requirement became effective with the American Jobs Creation Act of 2004.
Before May 7, 1997, the only way you could avoid paying capital gains taxes on your home-sale profit was to use the money to buy another, more expensive house within two years. Sellers age 55 or older had one other option: taking a once-in-a-lifetime tax exemption of up to $125,000 in profits. In all instances, there was tax paperwork (Form 2119) to fill out to show that you followed the rules. That all changed with the Taxpayer Relief Act of 1997 became law, which led to our current 121 Exemption that is available every two years.
The bottom line is simple now. If you live in the property as your primary residence two out of the last five years, you have an exemption and don’t need to exchange.
You can always reach out to me to discuss any questions regarding exchanges. You can call, email, or reach me via our website at TaxExchange.com.
Kevin Hummel CES®
Tax Deferred Exchange Practice Group
McFerran Law, P.S.
Offices in Tacoma, Kent, Seattle (Northgate), Everett and Silverdale.
Phone: (253) 383-1200 or Toll Free (800) 236-4948, Option 4
You are welcome to share this email with your associates or clients via email or on your website or blog with credit given to Kevin Hummel at McFerran Law, P.S.
tours.tourfactory.com 18503 36th Pl NE, Lake Forest Park, WA 98155, $335,000, 3 beds, 1 baths, 1120 sq ft For more information, contact Bob Moffatt & Laurie Jorgensen, RE/MAX Metro Realty, (206) 409-7355
tours.tourfactory.com 4409 127th Pl SE, Everett, WA 98208, $379,950, 4 beds, 3 baths, 2356 sq ft For more information, contact Bob Moffatt & Laurie Jorgensen, RE/MAX Metro Realty, (206) 409-7355
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